Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on next Monday, July 7, 2014. You can also find the re-balance calendar for 2013 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

2014 Half Year Brokerage Portfolios Review

As we are ending the first half of 2014, let’s first look at how various asset classes have behaved: 

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Asset Class Trends (As of 06/30/2014)
Asset Class 1 Weeks 4 Weeks 13 Weeks 26 Weeks 52 Weeks Trend Score
US Stocks 0.0% 2.1% 4.4% 7.0% 23.8% 7.5%
US REITs 0.2% -0.1% 6.0% 16.0% 12.6% 7.0%
Global Real Estate 0.9% 0.9% 8.0% 7.7% 13.1% 6.1%
Intl Stocks 0.0% 0.4% 3.9% 4.9% 20.0% 5.8%
Gold 0.9% 7.0% 3.6% 11.0% 5.7% 5.6%
Emerging Mkt Stocks 0.6% 1.8% 6.4% 6.3% 12.5% 5.5%
Long Term Treasuries 1.7% 0.2% 4.3% 11.2% 5.4% 4.5%
Intl Bonds 1.0% 1.7% 2.6% 4.8% 7.6% 3.5%
High Yield Bonds -0.2% 0.2% 1.8% 5.1% 9.7% 3.3%
Commodities -0.9% 2.2% 1.8% 3.4% 5.1% 2.3%
US Bonds 0.5% 0.1% 1.8% 3.7% 4.0% 2.0%
Cash 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

See Asset Class Trends page for more details

From the above table, U.S. stocks and REITs are on the top of the trend ranking table as what they have been consistently doing since the beginning of the year. The most significant development throughout the first half of the year is that emerging market stocks, gold and commodities have finally become more attractive than US bonds and cash. At the moment, risk assets are uniformly performing better than ‘safe’ assets, even though bonds have also done well. What we are seeing is a risk on mode that has existed for over almost two years now.  

Brokerage Portfolio Performance

Before we look at the portfolios, we would like to remind our readers again on how to follow and compare the latest portfolio performance. 

For brokerage portfolios, point your mouse cursor to ‘What We Do’ tab and click on the ‘Brokerage Investors’ link in the pull down menu, that will lead you to Brokerage Portfolios page. On this page, you can pretty much find all of our featured ETF and mutual fund portfolios for some major brokerages. Furthermore, scroll to the bottom of this page, you will find a link 

See More on How Our Featured Portfolios Are Compared

Click on this link, you can now compare many of these portfolios (across different brokerages and/or types or even special fixed income or conservative portfolios): 

ETF Portfolios (all data are as of 6/30/2014):

Latest Brokerage Specific ETF Tactical Portfolio Performance Comparison

Latest Brokerage Specific ETF Strategic Optimal Portfolio Performance Comparison

In general, we see both Tactical (Tactical Asset Allocation) and Strategic (Strategic Asset Allocation – Optimal) portfolios are performing comparably well. No surprise here in such a low volatility and steady trend markets. 

Mutual fund portfolios (as of 6/30/2014): 

Latest Featured Mutual Fund Tactical Portfolios Performance Comparison

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR
Schwab OneSource Select List Funds Tactical Asset Allocation Moderate 3.9% 8.4% 4.3% 10.4% 10.6%
Fidelity Extended Fund Picks Tactical Asset Allocation Moderate 3.3% 13.3% 7.1% 14.0% 13.2%
Vanguard Select Mutual Funds Tactical Asset Allocation Moderate 3.4% 15.8% 9.0% 12.4% 12.4%
Schwab Income Mutual Fund Select List Tactical Asset Allocation Moderate 6.2% 13.2% 7.7% 13.5% 9.6%
Etrade All Star Funds Tactical Asset Allocation Moderate 4.1% 11.8% 8.8% 13.7% 14.7%

**YTD: Year to Date

Latest Featured Mutual Fund Strategic – Optimal Portfolios Performance Comparison

We are somewhat disappointed with the performance. We believe the erratic behavior for some actively managed funds contributed to the lower performance, compared with ETF counter parts. As we have accumulated several experience with these brokerage suggested funds, we believe these lists need some more improvements. We are leaning to the belief that low cost broad base index funds will do better for asset allocation portfolios, at minimum such funds can reduce errors or surprises such as this one. 

Fixed Income Portfolios (as of 6/30/2014): 

Latest Fixed Income Bond Fund Portfolios Performance Comparison

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR
Schwab Total Return Bond 6.6% 10.8% 6.1% 9.1% 7.9%
Fidelity Total Return Bond 5.7% 5.7% 6.2% 8.8% 7.0%
TDAmeritrade Total Return Bond 6.6% 9.2% 7.1% 8.9% 7.4%
FolioInvesting Total Return Bond 6.6% 10.8% 6.1% 9.1% 7.9%
Etrade Total Return Bond 6.6% 10.8% 6.1% 9.1% 8.1%
PTTRX (PIMCO Total Return Instl) 3.5% 4.9% 4.3% 6.4% 6.4%
VBMFX (Vanguard Total Bond Market Index Inv) 3.6% 4.3% 3.2% 4.7% 4.8%

**YTD: Year to Date

As we mentioned many times (see, for example, April 21, 2014: Total Return Bond Investing In The Current Market Environment), we believe using the momentum/upgrade methodology on a small list of excellent total return bond mutual funds is probably the best way to invest in bonds (fixed income) so far. This is evident again that our portfolios have out performed PIMCO and other excellent portfolios: 

 Portfolio Performance Comparison

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
Schwab Total Return Bond 6.6% 10.8% 6.1% 9.1% 2.22 7.9% 1.45
PTTRX (PIMCO Total Return Instl) 3.5% 4.9% 4.3% 6.4% 1.8 6.4% 1.27
DBLTX (DoubleLine Total Return Bond I) 4.1% 4.6% 5.6%        
LSBRX (Loomis Sayles Bond Retail) 6.6% 11.7% 8.2% 12.1% 2.66 8.5% 1.36
MWTRX (Metropolitan West Total Return Bond M) 3.7% 5.7% 5.8% 8.5% 2.6 6.6% 1.38

See detailed comparison >>

Notice that even though LSBRX has done better than our portfolio, it did that with a much higher risk: it lost -22%, compared with Schwab total return bond portfolio’s -1% lost in 2008. 

Caution Ahead

Though markets are in a total lull, we are becoming more and more cautious. Let’s look at S&P 500 correction history first. 

The following chart shows the history of more than 10% correction for S&P 500 (using Vanguard 500 index fund VFINX as the proxy):

The last 10% correction lasted from 4/29/2011 to 10/3/2011: 

S&P 500 has not had a single 10% correction for more than two and half years now!

From the first chart, we can see that since 1987,  there have been three significant bear markets: 1987 stock market crash that resulted in more than 30% loss, 2000-2002 Nasdaq bubble that had a 45% maximum drawdown and  the financial crisis from 2007-2009 with over 55% maximum drawdown. The long running bull market from 1991 to 2000 was punctuated with a series of small 10% corrections. 

We believe it is also worthwhile to read a recent interview (It looks like a peak) with Robert Shiller, the inventor of CAPE10 (see Market Indicators ) to get some other perspectives.  In addition, Hussman has made many cautious commentaries (which we believe are totally called for). 

Market Overview

Though markets continue to hang on there, the persistent Treasury bonds’ strength draws our attention. Though at the moment, we have not seen a flare-up rise of these safe havens, we do believe investors should pay attention to their behavior. Finally gold has recovered year to date (with over 10% gain), another sign to see a possible major trend turn. 

For more detailed asset trend scores, please refer to 360° Market Overview.

We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now.  However, recognizing our deficiency to predict the markets, we will stay on course. 

We again copy our position statements (from previous newsletters): 

Our position has not changed: We still maintain our cautious attitude to the recent stock market strength. Again, we have not seen any meaningful or substantial structural change in the U.S., European and emerging market economies. However, we will let markets sort this out and will try to take advantage over its irrational behavior if it is possible. 

We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot. 

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